What’s the beef with farmers’ inheritance tax?
Farmers have left the fields for the streets of the capital in protest at changes to inheritance tax that will see death duties payable by some farmers on agricultural and business property.
The Treasury estimates the changes, revealed in the budget, will raise up to £520m a year. Farmers and campaigners say they threaten the future of thousands of multi-generational family farms.
Here, we take a look at the issues involved to explain why farmers are angry.
What is inheritance tax?
Inheritance tax (IHT) is ordinarily payable on estates at 40%. Estates passed to a surviving spouse or civil partner, charity or community sports club are exempt, and there are reliefs on property passed to children, relatives and others.
Estates worth less than £325,000 are not taxed, with a further £175,000 of relief given if a home is left to children or grandchildren, giving a total of £500,000 tax free. Currently around 4% of estates are liable for IHT.
What are the plans for inheritance tax on farmers?
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Since 1984 farmers and agricultural land and business owners have been exempt from IHT, thanks to a series of tax “reliefs” that can be applied to estates.
There are two broad categories, both offering 100% relief. Agricultural Property Relief (APR), covers land and farm buildings, and Business Property Relief (BPR) applies to livestock, machinery such as tractors and combine harvesters, and assets developed to diversify income, such as cottages converted to short-term lets, or farm shops.
From 2026 those 100% reliefs will end, replaced by limited relief for farmers on more generous terms than general IHT.
Estates will receive relief of £1m, with up to £500,000 of additional relief, as with non-farming estates. If a farm is jointly-owned by a couple in a marriage or civil partnership, the relief doubles from £1.5m to £3m.
Any tax owed beyond the level of relief will be charged at 20%, half the standard 40%. If farms are gifted to family members at least seven years before death no IHT is payable.
Why is the government acting?
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‘Starmer the farmer harmer’
Those generous reliefs have made agriculture an attractive investment for those seeking to shelter wealth from the taxman. Jeremy Clarkson, the UK’s highest profile farmer – and opponent of the government’s plans – said as much when promoting his Amazon series about becoming the proprietor of Diddly Squat Farm in Oxfordshire.
“Land is a better investment than any bank can offer. The government doesn’t get any of my money when I die. And the price of the food that I grow can only go up,” he told the Times.
Mr Clarkson is far from alone. Private and institutional investors, along with so-called “lifestyle” farmers funding purchases from previous careers, like the former Top Gear presenter and his Oxfordshire neighbour, the Blur bassist Alex James, now dominate agricultural land purchases.
Figures from land agents Strutt & Parker show those three categories made up more than half of all agricultural land purchases in England last year, with just 47% bought by traditional farmers.
In the first three quarters of this year the figure is down to 31%, fewer than the 35% of purchases made by private investors. (Strutt & Parker stress that less than 1% of land changes hands every year and the majority remains in the hands of farmers and traditional landowners.)
The most valuable estates also receive the lion’s share of tax relief. Analysis by the Resolution Foundation shows 6% of estates worth more than £2.5m claimed 35% of APR, and 4% of the most valuable accounted for 53% of BPR in 2020.
In the budget the Treasury said “it is not fair or sustainable for a very small number of claimants each year to claim such a significant amount of relief”.
How many farms does the government say will be affected?
The government says around a quarter of farms will be impacted by the changes, based on the annual tally of claims for Agricultural Property Relief and Business Property Relief made in the event of a farm owners’ death.
The latest figures for APR, for 2021-22, show that for estates worth more than £1m and therefore potentially exposed to the new regime, there were 462 claims, 27% of the total.
More than 340 claims were in the £1m-£2.5m band, with 37 claims from estates claiming more than £5m of relief, at an average of £6.35m.
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Budget tax measures ‘fair’
For Business Property Relief, which also includes shares held on unlisted markets including the London AIM market, there were 552 claims for more than £1m, or 13% of the total, with 63 claims worth more than £5m in relief, at an average value of £8m.
While ministers insist smaller farms will be protected, the merging of APR and BPR seems certain to increase the value of estates for IHT purposes. New tractors and combine harvesters are six-figure investments, and farmers say rising land values mean the reliefs are less generous than the government maintains.
What do farmers say?
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Farmer’s conditional support for tax shift
Farmers and campaigners say the government’s figures are far too low. The Country Landowners Association estimates 70,000 farms could be affected, a figure reached by multiplying average arable land value by the average farm size that they conceded should be treated with caution.
The National Farmers’ Union points to figures from the Department for Environment, Farming and Rural Affairs, which show 49% of farms in England had a net value of more than £1.5m. On that basis almost 50,000 farm owners may need to consult an accountant.
The NFU’s central point is that the economics of farming mean levying inheritance tax could be ruinous for many. While farmers and agricultural landowners are asset rich, courtesy of their land, property and equipment, they are cash poor.
Average income in every category of cropping farms declined in 2023, with cereals revenue falling by 200% year-on-year, and average earnings across the board of less than £50,000.
For farms with meagre incomes facing hefty IHT bills and no tax planning, land sales may be the only option. That could be terminal for some family dynasties, but it would make IHT the final straw, rather than the root cause in an industry that, for far too many farmers, simply does not pay.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
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Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
Disruption is expected to continue at the retailer until the end of this month.
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Mickey Carroll in May answered why M&S cyber attack was so bad.
The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
It is estimated that the cyber attack will cost M&S up to £300m this year.
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Days after M&S was attacked, the Co-op was targeted and forced to shut down some internal systems.
Harrods was then hacked, and also had to shut some systems despite its website and shops continuing to operate.
Of those arrested, a 17-year-old British male and a 19-year-old Latvian male were from the West Midlands.
A 19-year-old man was from London and a 20-year-old woman from Staffordshire.
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
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The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The sale of Royal Mail was approved in December
The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
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In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
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